Virtual Taxation
We live now in a world where the are rogue states routinely defying the rest of the world and developing nuclear weapons. A world where some states laugh at UN sanctions and rush ahead with their nuclear weapons program. A world where resurging authoritarianism is undoing whatever progress toward democracy Russia had made. A world that has US senators actively trying to go beyond their constitutional authority to try to inject themselves into foreign policy. A world where it is vital we get our priorities straight. And Congress is doing just that. They are working to solve a really, really major problem.
Taxing the virtual reality of internet gaming.
Veronica Brown is a hot fashion designer, making a living off the virtual lingerie and formalwear she sells inside the online fantasy world Second Life. She expects to have earned about $60,000 this year from people who buy her digital garments to outfit their animated self-images in this fast-growing virtual community.
But Brown got an unnerving reminder last month of how tenuous her livelihood is when a rogue software program that copies animated objects appeared in Second Life. Scared that their handiwork could be cloned and sold by others, Brown and her fellow shopkeepers launched a general strike and briefly closed the electronic storefronts where they peddle digital furniture, automobiles, hairdos and other virtual wares.
"It was fear, fear of your effort being stolen,'' said Brown, 44, whose online alter ego, Simone Stern, trades under the name Simone! Design.
Brown has reopened her boutique but remains uncomfortably aware that the issue of whether she owns what she makes — a fundamental right underpinning nearly all businesses — is unresolved.
As virtual worlds proliferate across the Web, software designers and lawyers are straining to define property rights in this emerging digital realm. The debate over these rights extends far beyond the early computer games that pioneered virtual reality into the new frontiers of commerce……
…..Congress has taken note and is completing a study of whether income in the virtual economy, such as from the sale of gowns that Brown makes, should be taxed by the Internal Revenue Service. The Joint Economic Committee of Congress is expected to issue its findings early next year.
"There seems to be a lack of ground rules in an area that would have explosive growth in the next decade or two," said Christopher Frenze, the committee's executive director.
Let's put aside the issue of a society that is more interested in a cyber-reality than in the real world for a moment. Let's look at the fact that lawmakers have spotted a potential new revenue source that doesn't actually exist. But may - probably will - end up being taxed. I don't begrudge Ms. Brown taking an opportunity and applying a talent to it to make money. Heck, I wish I could make money blogging.
But if we are now more concerned with virtual reality than actual reality, we have a problem. If Congress is more involved in worrying about taxing that virtual world than they are in the real events and challenges this nation faces from outside, then we have a huge problem.
Right now, the problem looks huge. Or bigger.
Civilization, Politics | Gaius Monday, 25 December , 2006
By jpe, Tuesday, 26 December , 2006 @ 1:04 am
First, it’s preposterous to claim that Congress only has time and resources to work on one issue at a time. The issue will be worked on in some obscure subcommittee of the tax committee.
Second, the revenue does exist - like winnings in casino chips, it’s just in a fully convertible quasi-currency. I guess the relevant question will be determining what the taxable event is: is it the act of conversion from virtual to real currency? Or is it the transaction that occurs in the virtual world? Since the value of the currency is readily determinable, it’s pretty tempting to claim the virtual transaction as the taxable event.
By ajacksonian, Tuesday, 26 December , 2006 @ 6:39 am
Yes, this is the conception of the Republican Nannystate that has oodles of time to oversee internet gambling. I guess they have all the other major threats to the Union all solved! And as this will be vesting *more* power to the Federal Government the Democrats will keep this and add on to it… that is how the Big Government concept works to cover *everything* and be the perfect Nannystate that takes everything from individuals.
Mind you, it is already impossible to stop such things as monetary flows through virtual economies of different virtual worlds and trading systems amongst those worlds via an exchange marked *also* exists. The first casino that takes up one of *those* currencies now has a ready and fungible way to slide money in and out of the entire banking system via virtual economies. And those, being international not only in scope, but in actual positioning of such things as file servers, is *not* amenable to any treaty or the UN. More traditional banking accountable to Nation States is amenable to this, because they have physical basis. Virtual basis, however, allows a system to be everywhere and nowhere at the same time. Throw in Ebay for the transfer of virtual goods for monetary value, and there is suddenly another entire set of auction venues for private individuals to move cash via an untraceable system.
And even if you *could* regulate the casinos, what can one do about gaming and gambling systems directly INSIDE virutal worlds? No *real* cash is being moved and no monetary value being exchanged until one moves out into the virtual exchange markets. All that is happening are changes in sums by computer codes and databases.
Mind you we have problems with the ‘unofficial’ money exchange systems of the Middle East and Latin America already, that do this in a physical basis.
To do that requires real time, effort and dedication… something *no* Congress is noted for. But Nannystate proposals? Always a winner!